AT THE PINNACLE OF THEIR PROFESSION: CPA TRIO WATCHES MORTGAGE BANKING FIRM SOAR

They're the thirtysomething CPA threesome of commercial real estate mortgage banking in Cleveland.
Pinnacle Financial Group Inc. partners James Leonard, Steven Sweress and F. Brock Walter all are in their 30s -- Messrs. Leonard and Walter are 37 and Mr. Sweress turned 38 last month -- and are alumni of accounting firms. They gravitated to real estate mortgage banking because it offered greater earnings potential and the chance to build their own business.
'It was an opportunity to be more lucrative earlier,' said Mr. Walter, who notes he still enjoys the accounting business and shows it by handling the firm's accounting himself rather than hiring a controller.
The financial attraction of the business boils down to the fee Pinnacle receives for placing a loan with a large insurance company or other permanent lender. A $10 million loan can produce a $100,000 commission, Mr. Walter said.
Mortgage bankers place the loans on behalf of real estate owners and developers. They also service some loans by collecting payments for lenders.
The three men head a firm that is on track to close as many deals this year as it did in 1998, when it closed $540 million in loans in 124 transactions. Pinnacle employs 10 in an office in Independence, and it plans to double its space this fall by moving to another building in the suburb. The firm also is looking to add regional offices to complement existing operations in Independence and Buffalo, N.Y.
The recent growth belies Pinnacle's modest beginnings in 1990.
Messrs. Walter and Leonard knew each other from a stint at Deloitte Haskins & Sells (now Deloitte & Touche LLP), and both had worked at Kramer & Associates, a Cleveland real estate investment firm. In their real estate baptism, Mr. Walter worked on financing properties and third-party mortgage brokerage, while Mr. Leonard worked on property acquisitions. Both became interested in forming their own mortgage brokerage firm even though Mr. Walter had less than two years of experience in the field w
hen Pinnacle opened.
'We knew it was a great niche, but with a limited number of firms,' Mr. Walter said. 'We thought that if we applied our financial backgrounds, we could develop something successful.'
With $75,000 borrowed from a friend (since repaid), the two set up shop and paid themselves $18,000 a year -- less, Mr. Walter recalls, than his accounting salary.
'We're doing better than that now,' Mr. Leonard said, though he declined to go into detail.
Mr. Sweress, who knew the other partners socially from a stint at Price Waterhouse, joined Pinnacle in January 1991 after two years in investment banking because he was attracted to the idea of building the company.
The trio faced some major obstacles. For one, they lacked significant relationships with either lenders or real estate owners. They also launched the business just as the real estate credit crunch was drying up conventional sources of financing, a situation that would not ease until the mid-1990s.
But Mr. Leonard said the credit crunch worked to the trio's favor because developers saw their normal sources of financing disappear and were forced to look for new ones.
'It afforded young people new to the market like us, new players, the opportunity to get in front of people who otherwise wouldn't take our calls,' Mr. Leonard said.
They were aggressive about seeking clients. Within 150 days of opening their office, Messrs. Leonard and Walter placed their first $7.5 million loan.
They continue to be go-getters.
'They're warriors,' said Guy Totino, chief financial officer of the Visconsi Cos. shopping center development and management firm of Pepper Pike. 'They courted me for a year and a half before we did a deal.'
Once Pinnacle won a deal with Visconsi, Mr. Totino said the company earned a place among the half-dozen mortgage bankers and brokers Visconsi works with regularly by providing strong client services, even to the point of analyzing how a prospective tenant would s
hape the permanent financing for a project such as a new shopping center.
Peter Rubin, president of Coral Co., a Beachwood-based shopping center development firm, said Pinnacle now is so service-oriented it 'blends into our staff' when his firm works on a big transaction with Pinnacle.
While Pinnacle forecasts doing the same volume of business this year as in 1998, such repetition doesn't worry the trio. The $540 million in loans in 1998 represented a 73% increase from 1997, when Pinnacle generated $312 million in loans from 76 transactions.
'We consider 1998 a great year,' Mr. Leonard said. 'I'll take flat revenues for years at that rate.'
To accommodate its growth, Pinnacle plans to move by Oct. 1 to Zaremba Management Co.'s new Independence office building, dubbed Independence Corporate Center. The firm has leased 3,000 square feet of office space there to expand from its current 1,600-square-foot digs in the 6300 Rockside Road building.
'We're overflowing here,' said Mr. Sweress, who became a Pinnacle partner in 1995.
All three principals work on developing and serving clients as well as the direction of the firm. Mr. Walter handles Pinnacle's accounting, Mr. Sweress oversees its computer needs and develops proprietary software programs for the firm, and Mr. Leonard trains the firm's junior mortgage bankers and loan analysts.
Pinnacle opened a Buffalo office in January 1997, when Perry Miceli, an experienced mortgage broker in that city, joined the firm. Pinnacle plans to add more offices as it finds people with established relationships and compatible business philosophies, Mr. Leonard said.
Pinnacle is looking at adding an office in southern Ohio in the next year, Mr. Walter said, and may add more within a six-hour, drive-time radius of Cleveland. Mr. Walter said additional offices will help Pinnacle gain more business with national lenders.
'We're under no pressure to grow,' Mr. Walter said. 'It's a desire to grow, but with an emphas
is on the quality of people.'
Mr. Walter said the company also continues to work to increase its loan volume in Cleveland, noting Pinnacle still calls developers who haven't yet taken its calls.